LONDON Lawmakers are calling for significant changes to the Bank of England's governance and accountability, as the central bank is set to get far-reaching new powers in an overhaul of the country's regulatory regime.
The Court of the Bank of England -- the body that controls the Bank's conduct of business -- should be turned into a proper supervisory board, and in a financial crisis, the finance minister should have more power to direct the central bank, the Treasury Committee said in a statement published on Tuesday.
The Bank of England will play an even more vital role in preventing future crises, yet aspects of its governance appear antiquated, chairman Andrew Tyrie said in the statement as the committee published its report about the Bank's accountability.
Scrutiny of the Bank should reflect the needs of 21st century democracy, Tyrie said. That means clear lines of accountability, and more information made available to Parliament. It should also be crystal clear who is in charge at a time of financial crisis.
Under rules proposed by Chancellor George Osborne, the Bank will get far-reaching new responsibilities, including oversight over banks and macro-prudential tools to take action in time to shield the financial system from another crisis.
The Treasury Committee has repeatedly voiced concerns, saying the Bank lacked accountability. Former Bank policymakers and bankers have also said the Bank may become too powerful.
In a first reaction to the report, Bank governor Mervyn King said the Bank would study the report carefully. The Bank has always made clear that with the expansion of its responsibilities envisaged in the draft Bill, new arrangements for the governance and accountability of the Bank would be necessary, King said in a statement.
In committee hearings, King rejected the idea that the Court of the bank should have more control, saying that the Bank was ultimately accountable to parliament.
The Bank governor has also pointed out that the ultimate decision about measures that put taxpayers money at stake lay with the government.
A Treasury spokesman said the ministry would study the recommendations in consultation with the Bank.
The committee said the government should not interfere with the day-to-day running of the central bank but the lines of responsibility in a crisis should be sharper.
The Chancellor should have a specific power of direction when public money is at risk, Tyrie said. This will place the Chancellor firmly in charge during a crisis and accountable to Parliament for decisions.
A new Supervisory Board should have the power to conduct and publish retrospective reviews of Bank policies and conduct, and should have the responsibility to respond to reasonable requests for information from parliament, the committee said.
The committee also proposed to limit the governor's term to a single appointment of 8 years, like the term of the European Central Bank president. Currently, a Bank governor is appointed for 5 years and the term can be renewed for another 5 years.
A majority of members of the interest-rate setting Monetary Policy Committee as well as the Financial Policy Committee -- the new macro-prudential regulatory body -- should come from outside the Bank, the committee said.
So far, employees of the central bank are in the majority on the MPC and the FPC, which has lead to concerns that groupthink may prevent both bodies from taking adequate decisions.
(Reporting by Sven Egenter)